Countless older Americans rely on Social Security to stay afloat financially in retirement. But the age at which you enroll can impact your overall payout, and the extent to which this crucial program benefits you and your family. With that in mind, here are a few reasons to consider filing for Social Security as late as 70.
1. You'll boost your benefits
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Your Social Security benefits are calculated based on how much you earned during your top 35 working years. The age at which you first take those benefits, however, can cause them to go down, increase, or stay the same.
If you wait until your full retirement age to take Social Security, you'll get to collect the full benefit amount you're entitled to based on your earnings record. Here's what that age looks like, depending on your year of birth:
That said, you're allowed to claim Social Security as early as age 62, but doing so will slash your benefits -- for life. On the other hand, if you delay Social Security past your full retirement age, you'll get an 8% boost in benefits for every year you hold off up until age 70, at which point the incentive to wait goes away. This means that if your full retirement age is 66, but you sit tight until you turn 70, you'll bump up your benefits by 32%, and that increase will remain in effect for as long as you collect Social Security.
Here's what that might look like using some real numbers. Say you're eligible for $1,500 a month in benefits if you file at your full retirement age of 66. Waiting until 70 will increase your monthly benefits to $1,980, leaving you with an extra $5,760 of retirement income per year. And that could buy you a lot more flexibility down the line.
2. You'll give your survivors a higher benefit
When many of us think about when to file for Social Security, we tend to keep our personal needs in mind. But if you have a spouse or child who might be eligible for benefits once you pass, holding off until age 70 could positively impact your survivors.
Your survivors' benefits are calculated based on the amount you collect from Social Security, so the higher your payments, the more your survivors will get as well. If you wait to file for benefits until age 70, you'll get the maximum amount your earnings record allows for, and your survivors, in turn, will also collect the maximum.
3. You'll get a chance to increase your nest egg
Though not everyone retires and collects Social Security simultaneously, if you file for benefits at age 70 and work every year up until then, you'll have a great opportunity to boost your nest egg. And that's a critical point to consider, because while Social Security will help you pay the bills once you're no longer working, your benefits will only replace about 40% of your former income, and that's just not enough to survive on.
It's estimated that 33% of Americans have no retirement savings, but that number climbs to 41% among households aged 55 to 64. Once you make the decision to hold off on Social Security until age 70, you'll most likely be inspired, or forced, to keep working until then. And the more years you work, the more of a chance you'll have to sock away extra cash in an IRA or 401(k).
Incidentally, retiring and filing for Social Security simultaneously at age 70 will help you in another way. If your salary is greater at the end of your career than it was at the beginning, which is the case for most workers, then you'll increase your benefits by virtue of having replaced a few lower-earning years with higher earnings.
Though there are plenty of good reasons to file for Social Security at age 70, it's worth mentioning that in some cases, it actually makes sense to file sooner. If you lose your job and have no other source of income, it's better to take your benefits earlier than risk racking up debt. Furthermore, if you don't expect to live very long, it often pays to start collecting Social Security as early as possible so that you get the greatest lifetime payout. But unless these circumstances apply to you, you'd be wise to think about postponing your benefits until the age of 70. Your retirement, in fact, might depend on it.
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